Car finance calculator

MONEY-SMART KIDS | Lessons from a prime-time family may help your teen STAY OUT OF DEBT.

WHENEVER a Camden kid is in trouble, my children are right there in the thick of it. The Camdens aren't next-door neighbors or classmates, but they're part of our extended family as characters on the TV drama 7th Heave, (WB, Mondays at 8 P.M. EST) about a minister, his wife and their seven children. My own kids love to yell at the TV screen whenever one of the Camdens does something stupid--which, this being TV, is every week. This season it has gotten pretty vocal around our house as we've watched Mary, the oldest Camden daughter and a recent high school graduate, slide down the slippery slope of credit woes.

A couple of seasons ago, Mary was a basketball star headed for a college scholarship. Then she got into trouble for a vandalism incident at school, lost the scholarship and announced to her devastated parents that she wouldn't be going to college at all. Living at home and lurching from one minimum-wage job to another, Mary was upset when her parents refused to buy her a car. So she went out and bought a spanking-new sports car on her own. Then she got a credit card.

Rock bottom. Several episodes later, unable to hold a job waiting tables, Mary was in predictable trouble. She couldn't make payments on the car, the insurance or her credit card bill. The card issuer was bugging her to pay off her $200 balance. She hit up her siblings for money, and they raided their baby brothers' piggy banks to raise $500 ("Don't do it!" we yelled).

Told by her creditors that she could solve her problems by stretching out her payments and raising her credit line--at an even higher rate of interest--she jumped at the chance to go deeper into debt, then squandered what remained of her brothers' $500 by spending her days at the movies. Her parents finally shuffled her off to Buffalo to be straightened out by her grandfather, the Colonel.

TV liberties aside, WB deserves high marks for portraying Mary as a typically naive teen when it comes to managing money. These four episodes could teach teenagers more about credit and finance than a semester-long class at school, provided that parents watching with them fill in some glaring gaps in their knowledge. When Mary gushes to her boss about the big bucks she can make at his restaurant, he cautions her not to forget about taxes and social security. "Oh," says a wide-eyed Mary, "do I get social security, too?" When her father asks what she'll do if she returns to school and can't keep up the payments on her car, she tells him she'll sell it. "Not for what you paid for it," he warns. "Great," she replies. "If I make money, I can put it toward tuition."

My own kids wanted to know if it's really that easy to buy a car. "In this country, the only thing you have to do to buy a car is be able to fog a mirror," says Steve Rhode, president of Myvesta.org, which helps consumers who are having financial problems. In the real world Mary might have been asked to come up with a co-signer for her car loan. But Rhode says plenty of lenders are willing to take on high-risk individuals --for a steep price. Would a credit card company really come after you for a $200 debt? my kids wondered. "In a heartbeat," says Rhode. While federal regulations restrict the tactics of collection agencies, "the original creditor has a lot of leeway."

Trial and error. When kids enter college or the workplace after high school, "many discover that their parents' benevolence declines," according to a survey of young people between the ages of 12 and 24 by the Zandl Group, a market-research firm. "They find themselves paying for housing, phone, online subscriptions, cars, insurance and tuition." Yet many teens are no better prepared than Mary Camden. While some young people get guidance from their parents, "others approach financial management as a trial-and-error process," says company president Irma Zandl.

Kids will be less likely to get into trouble if both you and they anticipate problems and know the consequences --especially because you can't count on the Colonel to bail you out.

Give teens experience in managing cash, particularly a budget for clothing and entertainment.

Help them open a checking account of their own with an ATM or debit card, preferably when they get their first part-time job.

Use a credit calculator at Kiplinger .com to show kids how long it would take to pay off a balance. Say your child spends $400 for back-to-school clothes and pays $15 a month on a card charging 21% interest. The payoff: just over three years.

Offer a peek at your family finances, especially fixed expenses such as mortgage, food, utilities and insurance. After high school, make kids pay fixed expenses of their own for tuition or rent, even if it's not the market rate.

Say no to a car--and think twice about encouraging kids to buy one on their own. That's a long-term financial commitment that many teenagers don't have the resources to make. --Reporter: KATHY JONES

Kiplinger.com

Make your kids money-smart with Janet Bodnar's weekly online column, "Dear Dr. Tightwad." You can also buy her book, Dollars & Sense for Kids, online or by calling 800-280-7165. E-mail her at jbodnar@ kiplinger.com.